'Russian Facebook' Settles Piracy Dispute With Sony Music

Russia's largest social networking website VKontakte has signed a goodwill agreement with Sony Music, a move that could potentially become a game changer for the Russian music industry.

"The litigation between Sony and VKontakte was canceled as a goodwill agreement was concluded," a spokesperson for VKontakte told Billboard, adding that the agreement was made possible thanks to some agreements between the two companies, the specifics of which remain confidential.

Yesterday, an arbitration court in St Petersburg began considering lawsuits filed against VKontakte by Sony Music Russia, Universal Music Russia & Warner Music UK.

It isn't yet clear what the status of the other two lawsuits is, but VKontakte, known as the "Russian Facebook," has apparently made a clear step aimed at shedding the reputation of a "notorious" web site, which it earned thanks to uploads of illegitimate music tracks by its users.

The lawsuits were filed in April 2014 after months of preparation, during which the plaintiffs said repeated attempts were made to persuade VKontakte to tackle its copyright infringements.

The lawsuits were supported by the organization representing record labels in Russia, the National Federation of the Music Industry (NFMI), and coordinated by IFPI, the organization representing the recording industry worldwide.

The legal action also included a claim for compensation of just over 50 million rubles ($830,000) in respect of the infringing repertoire.

The Russian business newspaper Vedomosti quoted unnamed sources in the record industry as saying that the goodwill agreement will lead to the creation of a legitimate subscription-based music service on VKontakte, with proper profit-sharing between VKontakte and rights holders.

There have been reports about VKontakte's plans to launch legitimate music services for a long time. For the last couple of years, many in the music industry have been speaking about the necessity to find a way to legitimatize VKontakte's music service rather than ban it.

The lawsuits followed a series of other litigations between VKontakte and Russian rights holders. For several years, courts seemed to be satisfied with VKontakte's claim that it had no control of user-generated content but was willing to remove any illegitimate content at the rights holder's first request.

But most recently, Russian courts turned against VKontakte. Earlier this month, the same court ruled against VKontakte in a lawsuit filed by the Russian record label Nikitin, awarding to the latter the highest ever amount in damages, 750,000 rubles ($12,450), for illegitimate uploads of 10 tracks by Russian singer Grigory Leps by VKontakte users.